Soda tax proposal should fizzle out

President Obama has promised the American people that full-scale healthcare reform will be enacted by the end of this year. The decidedly less-inspiring task of determining how to pay for his $1.2-trillion reform package has fallen to congressional lawmakers.

The Senate Finance Committee is considering dozens of options for generating the necessary revenue, including a plan to impose excise taxes on alcoholic drinks and “sugar-sweetened beverages,” like sodas, energy and sports drinks, iced coffees and teas, and dairy drinks. The plan would exempt diet and other artificially sweetened beverages from the tax.

Drink tax proponents claim that their plan kills two birds with one stone: it would generate needed revenue for health reform and bring down long-term medical costs by discouraging the consumption of purportedly unhealthy products like sugary beverages and alcohol.

Only in Washington is the idea of raising taxes on basic food items in the middle of a recession not immediately dismissed as laughable. Millions of Americans have lost their jobs over the last few months. Countless more have watched their retirement savings evaporate. Is now really the time to force them to spend more money on their favorite six-pack?

Further, if consumers start curbing their soft drink consumption, revenues for countless beverage companies, distributors, and restaurants will plummet. Jobs in those sectors will decline significantly.

Historically, taxes on basic goods disproportionately burden low-income Americans, who tend to spend a larger percentage of their income on food and drink than high earners.

Take cigarettes, for instance. Vanderbilt University’s W. Kip Viscusi has found that taxes on cigarettes “impose extremely regressive burdens on the poorest members of society who can least afford to bear the cost.” The poor will doubtless bear the brunt of higher taxes on soda and alcohol, too.

But if we discourage people from drinking soda by taxing it, won’t long-term health costs fall as people consume fewer unhealthy beverages? After all, excessive alcohol consumption is associated with cirrhosis of the liver and several types of cancer. And drinking sugary beverages can lead to obesity, diabetes, and other expensive-to-treat health problems.

The reality is not so simple. The evidence from existing government-run prevention programs shows that successful healthy-living initiatives rarely translate into lower health spending.

In fact, the opposite is true. Some of the most successful prevention programs appear to drive healthcare costs up.

That may seem counter-intuitive, but healthier people live longer — and thus consume more health care in their extra years of life. Individuals who live into old age require some of the most expensive health care around: late-life care. As people age, they become more susceptible to illnesses like osteoarthritis, prostate cancer, osteoporosis, and cognitive disorders like Alzheimer’s disease.

Treating illnesses like these in the final years of a person’s life is incredibly expensive.

A study in the British Medical Journal found that in countries with low mortality rates like the United States, “elimination of fatal diseases by successful prevention increases healthcare spending because of the medical expenses during added life years.”

Another study published recently in the New England Journal of Medicine called the idea that prevention saves healthcare resources “misleading.” The study conceded that some 19 percent of preventative health measures save money but found that “the vast majority reviewed . . . do not.”

Last February, researchers at the Dutch Ministry of Health set out to discover whether obesity prevention is an effective way to lower healthcare costs. Their conclusion was blunt: “Obesity prevention is not a cure for increasing health expenditures.”

These findings fly in the face of conventional wisdom, but that doesn’t diminish their relevance. Time and again, research has shown that preventive healthcare measures don’t lower the overall cost of health care — they raise it.

All this evidence hasn’t sapped the enthusiasm of the professional food scolds pushing for a drink tax. Just listen to Michael Jacobson of the Center for Science in the Public Interest, one of the tax’s big proponents.

Jacobson recently called sodas “nutritionally worthless.” Apparently he’s unaware that most Americans don’t drink soda for its carbohydrates — they crack open cans of Pepsi for pleasure.

But pleasure is a four-letter word for Jacobson. And he’s bent on imposing his puritanical vision on the rest of the country. In a recent interview, Jacobson called soda “clearly one of the most harmful products in the food supply, and it’s something government should discourage the consumption of.”

Jacobson has also argued that the increase in the tax on alcohol sales will “compensate society for the costs of alcohol abuse and alcoholism and to marginally reduce problem drinking.”

“Compensate society?” That’s a dangerous phrase. Most of us are much more comfortable leaving individuals to bear the costs of their behavior. Investing that authority in distant bureaucrats opens the door to all sorts of social engineering projects aimed at making citizens conform to the particular tastes of the people in charge.

Fortunately, ordinary Americans don’t seem to be in love with the idea of paying extra for their favorite soft drinks. A drink tax proposal in New York similar to the one under consideration in the Senate was just shot down. After a massive public backlash, Governor David Paterson was forced to kill his plans to impose an 18 percent tax on sugary drinks. With any luck, the U.S. Senate will heed Paterson’s example and shelve its plan.

A tax on soft drinks and alcohol will hamstring important — and relatively strong — parts of our otherwise faltering national economy in pursuit of public health benefits that aren’t likely to materialize. Worse, it will impinge upon some of our most basic rights as consumers. The Senate should let this proposed soda tax fizzle away.

Sally C. Pipes is President & CEO of the Pacific Research Institute. Her latest book is The Top Ten Myths of American Health Care.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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